[Senate Report 114-268]
[From the U.S. Government Publishing Office]
Calendar No. 111
114th Congress } { Report
SENATE
2d Session } { 114-268
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THE SMALL BUSINESS LENDING REAUTHORIZATION ACT OF 2015
_______
May 26, 2016.--Ordered to be printed
_______
Mr. Vitter, from the Committee on Small Business and Entrepreneurship
submitted the following
R E P O R T
[To accompany S. 1001]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 1001) to establish
authorization levels for general business loans for fiscal
years 2015 and 2016, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
I. INTRODUCTION
The Small Business Lending Reauthorization Act of 2015 (S.
1001) was introduced by Senator James Risch, with original co-
sponsorship from Senators Ayotte, Coons, Gardner, Hirono,
Peters, and Shaheen, on April 16, 2015.
The Small Business Lending Reauthorization Act of 2015
increases the Small Business Administration's (SBA) 7(a) Loan
Program authorization level to $20.5 billion in fiscal year
2015 and $23.5 billion in fiscal year 2016.
During the markup of the bill, the bill was approved
unanimously by voice vote.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
The 7(a) Program's loans are made by SBA partners (mostly
banks but also some other financial institutions) and partially
guaranteed by the SBA. As such, taxpayer funds are only used in
the event of borrower default. This reduces the risk to the
lender but not to the borrower, who remains obligated for the
full debt, even in the event of default.
The 7(a) loan offers flexibility, such as longer terms and
lower down payments, compared to other types of business
financing. 7(a) loans contribute to small business growth,
because with longer terms and lower payments, owners can retain
working capital and maximize cash flow. These loans are
eligible to be used for standard business operations such as
purchasing equipment, machinery, furniture, fixtures, supplies
or materials, purchasing real estate, including land and
buildings, constructing a new building or renovate an existing
building, and establishing a new business or assisting in the
acquisition, operation or expansion of an existing business.
The 7(a) program's current guaranty rate is 85% for loans
of $150,000 or less and 75% for loans greater than $150,000 (up
to a maximum guaranty of $3.75 million--75% of $5 million).
Although the SBA's offer to guarantee a loan provides an
incentive for lenders to make the loan, lenders are not
required to do so. There has been an increased demand for 7(a)
loans, from $15.25 billion in FY12 to over $19.2 billion in
FY14 through over 52,000 7(a) loans. Recent data has shown an
increase in demand with industry experts predicting that volume
will reach $20.5 billion by the end of FY15, significantly more
the $18.75 billion approved by Congress last December.
According to documents released by the SBA, the number of
smaller loans (those under $150,000) increased by 23 percent in
FY13, from 24,923 to 30,675. The 7(a) program's maximum gross
loan amount for any one 7(a) loan is $5 million (up to $3.75
million maximum guaranty). In FY2014, the average approved 7(a)
loan amount was $368,737.
Last year Congress increased the 7(a) authorization to
$18.75 billion as part of a Continuing Resolution late in the
fiscal year. Without this increase more than $200 million in
7(a) loans would not have been made to small businesses.
III. HEARINGS & ROUNDTABLES
In the 111th Congress:
On October 1, 2009, the Senate Committee on Small Business
and Entrepreneurship held a roundtable discussion titled
``Reauthorization of SBA Finance Programs and the Impact of the
Small Business Provisions in the Recovery Act.'' After the
passage of the 2009 Recovery Act, 7(a) loans quickly became one
of the most active SBA programs, especially as banks began to
tighten their lending standards. The increased importance of
working capital for established small businesses was also cited
as a reason for the amount of applicants for the 7(a) program.
Associate Administer for SBA Eric Zarnikow expressed concern
that the 7(a) Loan Program, due to the volume of loan
applicants, would run out of funding by November.
In the 112th Congress:
On June 16, 2011, the Senate Committee on Small Business
and Entrepreneurship held a hearing titled ``An Examination of
SBA Programs: Eliminating Inefficiencies, Duplications, Fraud
and Abuse.'' With the SBA having delivered over $42 billion in
authorized loans to small businesses through the 7(a) Loan
Program, Executive Vice-President of the SBA Lending Division
Greg Clarkson expressed concern that they would exceed the 7(a)
Loan Program's authorized amount for FY2011. These budgetary
shortfalls could have resulted in curtailment of credit or
temporary termination of the loan program until more funding
was received, leaving hundreds of small businesses without
guaranteed loans.
IV. DESCRIPTION OF BILL
S. 1001, the Small Business Lending Reauthorization Act of
2015 increases the 7(a) loan program authorization level to
$20.5 billion in fiscal year 2015 and $23.5 billion in fiscal
year 2016.
V. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules
of the Senate, the following vote was recorded on April 23,
2015.
A motion to adopt the Small Business Lending
Reauthorization Act of 2015, a bill to establish authorization
levels for general business loans for fiscal years 2015 and
2016, was approved unanimously by voice vote with the following
Senators present: Senators Vitter, Risch, Fischer, Gardner,
Ernst, Ayotte, Enzi, Shaheen, Cantwell, Cardin, Heitkamp,
Booker, Coons, Hirono, and Peters.
VI. COST ESTIMATE
In compliance with rule XXVI (11)(a)(1) of the Standing
Rules of the Senate, the Committee estimates the cost of the
legislation will be equal to the amounts discussed in the
following letter from the Congressional Budget Office:
June 9, 2015.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1001, the Small
Business Lending Reauthorization Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Keith Hall.
Enclosure.
S. 1001--Small Business Lending Reauthorization Act of 2015
S. 1001 would set the maximum amount of debt that the Small
Business Administration (SBA) can guarantee under the agency's
general business loan program, also known as the 7(a) program,
at $20.5 billion for fiscal year 2015 and $23.5 billion for
fiscal year 2016. The agency's 2015 authorization level for
loan guarantees under the 7(a) program is currently $18.8
billion.
Under current law, businesses participating in the 7(a)
program are required to pay various fees that are sufficient to
offset the program's estimated subsidy cost, that is, the
estimated long-term cost to the government of a loan guarantee,
calculated on a net-present-value basis. Based on information
from the SBA, CBO expects that increasing the loan levels for
the program would not affect the estimated subsidy cost, nor
would the changes increase the cost to administer the program,
which is recorded on a cash basis. Therefore, CBO estimates
that implementing S. 1001 would not affect discretionary
spending. Enacting S. 1001 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
S. 1001 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by Theresa Gullo, Assistant Director
for Budget Analysis.
VII. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI (11)(b) of the Standing Rules
of the Senate, it is the opinion of the Committee that no
significant additional regulatory impact will be incurred in
carrying out the provisions of this legislation. There will be
no additional impact on the personal privacy of companies or
individuals who utilize the services provided.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section provides for the title, ``Small Business
Lending Reauthorization Act of 2015''.
Section 2. General business loans authorization
This section increases the authorized limit for general
small business loans under 7(a) of the Small Business Act for
fiscal year 2015 to $20,500,000,000 and for fiscal year 2016 to
$23,500,000,000.